Which of the Following Scenarios Carries the Greatest Risk of NOT

question 54

Multiple Choice

Which of the following scenarios carries the greatest risk of NOT being able to meet required payments (capital expenditure, dividend, interest and principal requirements) totaling $96 million?

• A) Expected cash flow, $116 million, standard deviation $5 million
• B) Expected cash flow, $107 million, standard deviation $5.5 million
• C) Expected cash flow, $112 million, standard deviation $8 million
• D) Expected cash flow, $134 million, standard deviation $38 million

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Definitions:

Efficient

Refers to a situation where resources are utilized in the best possible manner to produce desired outcomes without wasting materials, energy, or time.

Government Intervention

Actions taken by a government to influence or regulate different aspects of its economy.

Coase Theorem

Suggests that if property rights are clearly defined and transaction costs are low, parties will negotiate to solve externalities on their own.

Externalities

Costs or benefits that affect a party who did not choose to incur that cost or benefit, often leading to market failures.